The Hindu Business Line : World Bank report finds pitfalls in AP reforms process

A constrained and inflexible industrial labour market; an uncompetitive market structure in agriculture; low level of national and international integration; inadequate dissemination of policy changes involving administrative and regulatory barriers; and socio-economic rigidities have resulted in a skewed distribution of opportunities.

Hyderabad , Feb. 21

A DECADE of reforms during the 1990s in Andhra Pradesh could only see a 4.1 per cent growth in per capita income, lower than the national average of 4.2 per cent. Worse still, the figure is lower than the 5.5 per cent rate achieved by its less reformist neighbours such as Karnataka and Tamil Nadu.

Also, the State's GSDP (Gross State Domestic Product) growth rate in the post-reform period has not been much different from what it was in the pre-reform period. The pace of poverty reduction too has slowed down. The State fared badly in manufacturing and agricultural sectors as well. As a result, its rank in the Government of India's Human Development Index slipped from ninth in 1990-91 to tenth in 2000-01.

Worried by the performance, the World Bank has come out with a post-mortem of the reform process in Andhra Pradesh. The Bank, however, asserts that it is no review of reforms.

The idea is to highlight a selected agenda to broaden and deepen the reform programme, it points out.

In the report titled `Unlocking Andhra Pradesh growth potential: An agenda to achieve the Vision 2020 growth targets', the Bank comments that Andhra Pradesh is a leader in reforms but not yet in growth.

It identifies five major barriers that inhibited growth and poverty reduction.

Interestingly, the report has also made some critical remarks on the then Government, which the Opposition parties in the State described as the blue-eyed boy of the World Bank. "Higher growth is not just about more investment, bigger infrastructure projects, taller buildings, longer roads and finest flyovers," it says.

Notwithstanding the Telugu Desam Government's claims on attracting foreign direct investments, the report finds that due to lower penetration of FDI and exports, firms in the State have relied on domestic technology and local markets to grow and, are thus less productive and more fragmented than their counterparts in other industrialised States.

"The Government has imposed many tariff and non-tariff barriers such as central sales tax, entry tax and relatively high sales tax on industrial intermediate goods," it says.

Stating that policy changes have not percolated down, it says many investors are reluctant to use the much talked about single-window clearance mechanism as rejections seem to be higher in the new system than in the older system.

Interestingly, the Bank made a direct reference to the Naxalite issue and an indirect reference to the demand for separate Telangana State.

"The State, formed by combining regions with widely different endowments, historical legacies and institutional problems, exhibits considerable intra-state disparity in the distribution of opportunities," the report said.

"These disparities have manifested themselves periodically in the form of Naxalite violence, farmer uprisings, political movements for State bifurcation, labour unrests, and ethnic violence, putting the sustainability of the economic growth process in jeopardy."

Suggesting a five-point agenda to trigger growth, the report points out that a flexible labour market means improved productivity and more FDI.

The other suggestions are, alternative production and marketing arrangements in agriculture; greater thrust on inter-State commerce and international trade; accelerating the power sector reform and a rural policy to reduce disparities.

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